Concept explainers
Determine the amount of cash paid for merchandise.
Answer to Problem 21E
Determine the amount of cash paid for merchandise.
Therefore, the amount of cash paid for merchandise is $1,025,800.
Explanation of Solution
Statement of
Direct method: This method uses the basis of cash for preparing the cash flows statement.
Cash flows from operating activities: In this direct method, cash flow from operating activities is computed by using all cash receipts and cash payments during the year.
Cash Receipts: It encompasses all the cash receipts from sale of goods and on
Cash Payments: It encompasses all the cash payments that are made to suppliers of goods and all expenses that are paid.
The below table shows the way of calculation of cash flows from operating activities:
Cash flows from operating activities (Direct method) |
Add: Cash receipts. |
Cash receipt from customer |
Less: Cash payments: |
To supplier |
For operating expenses |
Income tax expenses |
Net cash provided from or used by operating activities |
Cash payments for purchase represents the total amount of cash paid for the purchase as well as to the accounts payable.
Therefore, the amount of cash paid for merchandise is $1,025,800.
Working notes:
Calculate increase or decrease in merchandise inventories:
Calculate increase or decrease in accounts payable:
b.
Determine the amount of cash paid for operating expenses.
b.
Answer to Problem 21E
Determine the amount of cash paid for operating expenses.
Therefore, the amount of cash paid for operating expenses is $180,780.
Explanation of Solution
Cash payments for accrued expense represent the total amount of cash paid for the operating expense as well as to the accrued expense payable.
Therefore, the amount of cash paid for operating expenses is $180,780.
Working note:
Calculate increase or decrease in operating expenses / accrued expense payable:
Want to see more full solutions like this?
Chapter 16 Solutions
Financial Accounting
- Financial Accountingarrow_forwardCUMULATIVE COMPREHENSION PROBLEM: ECHO SYSTEMS (This comprehensive problem was introduced in Chapter 2 and continues in Chapters 4 and 5. If the Chapter 2 segment has not been completed, the assignment can begin at this point. You need to use the facts presented in Chapter 2. Because of its length, this problem is most easily solved if you use the Working Papers that accompany this book.) After the success of of its first two months,Mary Graham has decided to continue operatine Echo Systems. (The that occurred in these months are described in Chapter 2.) Before proceeding in December, Gra- e new accounts to the chart of accounts for the ledger: hamadds these ne No. 105 210 Account Accumulated Depreciation Office Equipment ... Accumulated Depreciation, Computer Equipment ............ Wages Payable...... Uneamed Computer Services Revenue..... Depreciation Expense, orice Equipment............. Depreciation Expense. Computer Equipment........... Insurance Expense Rent Expense Computer…arrow_forwardWhat is the direct labor efficiency variance for October on these general accounting question?arrow_forward
- Financial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage LearningFinancial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage LearningManagerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
- Financial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningCollege Accounting (Book Only): A Career ApproachAccountingISBN:9781337280570Author:Scott, Cathy J.Publisher:South-Western College Pub